Katrina Wittkamp

Business Specifics

2012 Sales Volume: $5.6 million
2013 Projected Sales Volume: $9.5 million

Total Number of Employees: 50

Between the pool table in the reception area and the dogs romping in the hall, you’d think little would get done in this small warehouse/office space in suburban Chicago. But you just wouldn’t be looking closely enough. The very walls—smooth and painted in neutral tones—are hard at work in this $9.5 million operation. Started with a small wad of cash and a lot of big ideas, it’s no surprise that this thriving enterprise was launched by this year’s Fred Case Entrepreneur of the Year Award winner, Nick Richmond. Among those big ideas: a new twist on an open-house marketing campaign, and producing the product he sells.

Begun during the recent recession, Matrix Basement Systems focuses solely on basement refinishing using a structural insulated panel (SIP) wall system that Richmond manufactures in-house employing a unique installation process. Behind the smooth walls, play space, and offices, a small warehouse cranks out panels and readies them for the approximately 375 jobs that Matrix completes each year, as well as for sale to other businesses. “Bringing manufacturing in-house was more innovative and cutting-edge than what other applicants were doing,” says Bruce Case, one of the three award judges.

The System

The wall system itself is fairly simple: 4-by-8-foot panels made of two ¼-inch magnesium oxide skins that sandwich a 3-inch layer of closed-cell foam between them. Installers slide the panels into aluminum runners attached to the home’s floor and ceiling and also to vertical supports spaced every 4 feet. Panels include electrical and plumbing chases. Seams are covered using an antimicrobial tape. Only light mudding and sanding is needed—it’s a pretty clean operation—and, depending on the job size, a basement project usually takes between 10 days and four weeks to complete. ( Watch the installation process.)

Everyone in the company is a basement evangelist. After all, “it’s taboo to put drywall in a below-grade space,” Richmond says. “In the core of our DNA, we feel this way.” And everyone at the company can expound on the virtues of the panels: R-value of 18; waterproof, as well as fire, mold, and mildew resistant—unlike “the other guys” competitor Owens Corning; look just like regular drywall when finished; can be painted or wallpapered; and can hold pretty much anything a client chooses to hang on them. Richmond is confident: The product carries a 50-year warranty.

In the past three and a half years, he has done extensive research and development on the panels regarding adhesives, splines, seam elimination, and the effects of humidity and air temperature, as well as streamlining the installation process to squeeze out the most profit.

Director of operations Brian Barrick says they continue to tweak the system but are willing to take risks only when they feel they have enough knowledge to move forward. That said, he adds, “while we wouldn’t release something prematurely that’s not safe, you can’t wait for something to be perfect before you roll it out.” Richmond feels so strongly about the product that he plans to invest $100,000 in testing it for possible applications in new construction.

 

Special Sauce

Richmond has a consummate understanding of sales and marketing. Think sports strategy—innovative, nimble, bold, but with a sense of fun in the game.

“Nick is a marketing genius,” says marketing director Jeremiah Royer. He meets with Richmond every Tuesday and then directs the marketing plays. Royer uses online maps to target neighborhoods. Newer construction in suburban Chicago is their main arena. One office wall has a large whiteboard with lists of upcoming events. There are the job signs, the brochures, a website, search engine optimization for the website, videos, testimonials, trade and home show appearances, a social media strategy, and even phony $100 bills with Ben Franklin on the front and information about Matrix on the back. But the “special sauce,” Royer says, “is the Open House program.” (Read about open house rules.)

Begun two years ago, the Open House program alone costs Matrix about $30,000 per month. That’s not a typo. Many remodelers who see Richmond’s success and come to him asking about selling the system walk away when they hear what he spends on this campaign. But after a “crazy weekend of Open Houses recently,” says Richmond, sales reps set 80 appointments and will close about 20% net. “Obviously sales cancel or are rejected by financing, but 20% usually are good, installed basements.” The average sale is $27,000, so from 80 set leads Matrix will net about $430,000 in sales—from just one weekend.

Holding an open house at which a project is shared with prospective clients is not a new idea. But the way Matrix runs its open houses is. At the point of sale, homeowners are given a discount if they choose to participate. If they don’t take advantage of the discount up front but choose to hold an open house after the project is completed, they can receive “proceeds” from the event. For every lead generated by their open house, Matrix pays the homeowners $50. They also get 1% of all net basement contracts that result from their event.

Matrix sends salespeople called “promoters” to work the event. Several of Matrix’s promoters are former clients who are so happy with the system that they are willing to go to other people’s homes to help sell the product. They work part-time as 1099 employees, and they go through a sales training program to enable them to answer questions and objections. “But we don’t give them all the answers,” Royer says. “We want prospects to call us.”

Royer arms promoters with an “Open House Bag” that includes a sample of the Matrix panel with a chase, and booties, a lead sheet, a piece of drywall and 2x4 (what Royer calls, “the competition”), and a jar of water with drywall soaking in it.

They show videos of the install­ation process and testimonials. “It’s a wonderful gig,” says Jerry Rottman, a retiree who had a Matrix Basement System installed a few years ago and now works at Matrix’s open houses several times a month. “I like the product so much—this was a no-brainer for me.”

Richmond wants to see sales calls done between 48 and 72 hours after someone has been to an open house. Salespeople get prequalified leads, many of whom have visited four or five open houses. Those prospects are usually ready to buy when the sales call occurs. Matrix offers financing to help with the money challenge.

Royer’s two main avenues for advertising open houses are Every Door Direct Mail (EDDM), from the U.S. Postal Service, and coupon magazines. Royer describes EDDM as “cheap, targeted marketing for small business,” which allows for 5,000 mailers per drop. For each open house—and there might be 10 to 12 in a month—Royer hand delivers 3,500 pieces to the post office. Matrix does the graphic design on the large mailers, which are printed (out of house) on thick paper. Mailers announce the open houses and include “a Google map, driving directions, and a hook,” Royer says.

The other big marketing piece is advertisements in Clipper Magazine and Save On Everything, two coupon publications that reach a combined 2 million households. The ad, usually a double-page spread, includes a box listing all the upcoming open house events.

To reach as many people as possible, Barrick says, “We hit the same area over and over. Think basement. Think Matrix. We haven’t saturated all the neighborhoods, yet. It may take [touching them] 10 times before [people] come to an open house.”

Richmond knows he needs volume for the open house program, but, he says, that while he wouldn’t mind being the biggest and the most profitable, “Volume is for vanity and profit is for sanity.” He is laser-focused on the profit end game, and that begins with his passion: selling.

 

Plenty of Preparation

A Bluetooth device firmly affixed to one ear, and his pug, Bailey, tucked like a football under one arm, the jeans and polo-clad Richmond strides through Matrix—the team captain checking on his players, who include two long-time friends, Barrick—whom he has known since college and who helped him start the company—and director of production Nate Keller from grade school. Both agree that Richmond, 31, seems to have spent his life grooming himself for just this moment. He cut his teeth by selling his used video games to his middle school friends, got hooked on Rick Grosso sales tapes during his teen years, studied sales and marketing at Western Michigan University, then worked in retail for a national chain jewelry store and eventually got into the window industry with his older brother.

“I saw his success and I thought, ‘Whatever he can do, I can do better,’” Richmond says of his brother, who took a structured and disciplined approach to his work. Richmond says he learned more from his brother than he did from the window company whose philosophy was, “Here are some samples and here’s a lead.”

Richmond is candid about his working class background in Flint where his father was a millwright for General Motors for 35 years. “He’s like MacGyver,” Richmond says of the man who could fix anything. Richmond says he sometimes wishes he were more like his father, yet recognizes that, “Maybe not being able to do all that stuff has allowed me to be an entrepreneur.” But his inner drive was always about getting out of Flint in both a physical and a mental sense. “I don’t want to go back to that place. Failure can motivate you to try harder.”

And there were a few business failures before Matrix, such as the sunroom division that Richmond and his brother started in Michigan just as the economy tanked. “We dissolved it and moved on,” he says.

And now he presides over a company with 15 employees in the office, 35 in-house installers, and upward of 50 subcontractors in the field. He sits behind a big desk in his own office surrounded by what he calls a “collage of different places I’ve been”—from a record player with Jimi Hendrix queued up to a bottle of Maker’s Mark bourbon and a humidor.

He doesn’t let Matrix’s apparent success go to his head, and, when he talks about the imminent birth of his first child [his son, Nicholas, was born in August], he worries aloud how wealth might affect his son’s childhood. Richmond hopes that he himself can follow the example of his father-in-law, a successful restaurant owner: “He lives well but frugally. He’s the happiest man alive,” he says.

 

The Right Path

You might think that having customers sell for you wouldn’t work for a man who likes to control the process so much that he manufactures his own product. But it does, in part because Richmond says he hires for attitude; he will train people in sales. The full-time sales team is made up of eight energetic men. “Energy is critical to morale,” Richmond says. “I have to keep that energy going. It’s like spinning plates, and if one is flagging, I’ve got to give it a little love.”

He grabs a piece of paper and draws a squiggly path. “I try to get salespeople to follow a road map,” he says. “We lead people—not push them—through attitude and energy. We know that if a salesperson follows the process, he will find consistency and success.” And if he strays? Richmond brings him back to the path and the process. “But it’s not like [selling at] McDonald’s,” he says. “That’s the fun part [of working here].”

The installers, designers, draftsman, and back-end people feel the love, too. Richmond enjoys treating his crew to dinners, boat rides, and sporting events, and everyone is able to garner some form of additional income for working harder, faster, smarter.

Richmond’s Bluetooth ear piece runs a daily marathon. Salespeople call in each night to recap their day. They often call during a sale to use his expertise as leverage. “But I know that if my sales guy calls one hour into it, he hasn’t gone through the process,” Richmond says. He holds weekly sales meetings. When reps are hired, they have to watch—and memorize—the Rick Grosso sales training video made just for the company.

The pitch that Grosso walks them through compares Matrix with and differentiates it from its competition: drywall and the Owens Corning Basement Finishing System. Salespeople show prospects a piece of drywall that has been sitting in water—not a pleasant sight or odor. They talk about the pros and cons of the Owens Corning product. It has visible seams. It’s water resistant, not water proof.

Like the employees themselves, customers are lead—not pushed—to the realization that Matrix is the obvious choice. Matrix looks like drywall. “And don’t you want your basement to look like the rest of your home, Mr. and Mrs. Prospect?” Matrix is water and mold proof. It is hard as stone. You can smack it with a mallet and nothing happens to it. “Does a baseball ever hit your basement wall, Mr. and Mrs. Prospect?”

“If we don’t have the path to take them down, they’ll never come to the conclusion that they should buy from us,” Richmond says.

Over the Wall

The path might be well laid out, with goals and objectives along the way, but it is a path not a cul-de-sac. Richmond not only manufactures panels for Matrix projects but also for sale to dealers in other locales. As award judge Bruce Case says, “Bringing the manufacturing part in-house makes sense. This was not a harebrained scheme.”

Richmond toys with the idea of franchising, but his first step is opening a second office in Detroit, a market he knows well. (That office opened in August, and is projecting $2 million in sales its first year.) He would also like to open offices in other markets across the country. He looks at new-home building and sees vast opportunities. He talks about possibly using the product for subfloors. He’s going to take over the warehouse next door “so we can get every miscellaneous piece—doors, hardware—and have that controlled in-house,” he says. “Who knows where manufacturing can go? Maybe we can create a shed. A click-and-lock system. There are other capabilities beyond standard basement panels.”

Richmond’s success is more than just a case of right place-right time. He discovered an untapped market: “In the basement-finishing world, there aren’t many major players,” he says. Yes, homeowners are nesting more, renovating existing internal space without spending the money on additions, but it takes more than that to go from a $5,000 investment to nearly $10 million in sales in less than four years. Success and profitability mean constant vigilance and accountability.

“As long as the battery on my phone is charged, I’m working,” Richmond says. “I’m tuned in all the time.” So while the dogs take turns chasing each other around the desks, and the pool table is open and ready for competition, the two-legged office occupants are usually too busy to play. But they seem to be having fun making money. Start early. End late. Work hard in between. Game on.

Stacey Freed is a senior editor at REMODELING.

 

Know the Rules Before Trying Open Houses

The “open house” or “showcase home” discount is not new, but, warns construction attorney and REMODELING columnist D.S. Berenson, the inducement is only “legal and defensible if it’s structured correctly.”

Some sales representatives pull out the showcase home discount and say, “‘I can give you another x% off if you’re wiling to make your home available as a showcase home.’ But if they offer it at every close and they’re not actually doing many showcase homes, then the rep is just throwing it out there and it has no legitimacy,” Berenson says.

To make it legitimate, you need to do the following:

  • Showcase enough homes—at least 1 out of 15 or 25—suggests Berenson.
  • Have an advertising release, since you’re using a client’s home to advertise your product (a release also builds credibility with the homeowner).
  • Have a plain-English showcase agreement that explains the details, e.g., “If you’re selected, we’ll give you at least 30 days notice. We have a year to select your house. It will be on a Saturday from 10 to 5. We’ll staff it. We’ll have insurance. We’ll put up a sign. We’ll post a newspaper advertisement that will look something like this. We’ll leave the house in broom-clean condition. ...”

And make sure that your insurance is really on top of this, Berenson says. “Your liability policy usually covers your people in a showroom or at an event, but in this case you’re engaged in someone else’s home in selling activities not for that person.”

 

The Fred Case Award

Nick Richmond is the seventh winner of the Fred Case Remodeling Entrepreneur of Year Award, established by Fred Case, the founder, co-chairman, and CEO of Case Design/Remodeling.

Nominees for the award are evaluated on their business acumen, company financial strength, community and industry involvement, and entrepreneurial spirit.

The award is open to all of those in the remodeling industry and recognizes a specific individual, not a company. This is the only industry award of its kind in that a cash prize is awarded to four finalists as well as to the winner. “The Fred Case Award is all about giving back to the industry through innovation—innovation that takes the client experience to new heights; innovation that takes the team experience to new heights; innovation that takes the remodeling industry to new heights,” award judge Bruce Case says. “Nick’s innovation [bringing manufacturing in-house] impressed me most.”

Fred Case founded his company in 1961 with a little money and a lot of ideas, making it a point to create a business and not a practice and to constantly elevate the level of professionalism in the industry.

The judges for this year’s award were Bruce Case, president at Case Design/Remodeling and Fred’s son; Sal Alfano, editorial director of the Remodeling Group at Hanley Wood business media, which publishes Remodeling; and Kermit Baker, senior research fellow at the Joint Center for Housing Studies of Harvard University.

Previous Fred Case Award Winners